Morgan Stanley Sees Headwinds for Carnival, Royal Caribbean Stocks

CCL and RCL both hit new lows earlier

by Karee Venema

Published on Jun 5, 2018 at 10:08 AM
Updated on Jun 24, 2020 at 10:16 AM

Morgan Stanley chimed in on cruise lines today, saying recent strength in oil prices and the U.S. dollar have created stiff headwinds for the sector. The brokerage firm lowered its earnings-per-share (EPS) forecasts and price targets for several names within the sector, including Carnival Corp (NYSE:CCL) and Royal Caribbean Cruises Ltd (NYSE:RCL).

Carnival Stock at Risk for More Bear Notes

Carnival, for instance, saw its 2018 EPS estimate cut by 6%, and its fiscal 2019 EPS slashed by 11% -- citing concern over the company's non-U.S. dollar exposure and expiring fuel hedges. The brokerage firm also cut its CCL price target to $63 from $70 -- in line with last night's close at $63.34.

CCL stock has now dropped 3.7% to trade at $61.01, and tapped a new annual low of $60.49 out of the gate. This is just more of the same for a stock that's been in a channel of lower highs and lows since early February, with Carnival now down 8% year-to-date.

More bearish brokerage notes may be on the horizon, if this negative price action continues. Of the 13 analysts covering CCL stock, eight still maintain a "strong buy" rating, with not a single "sell" on the books. Plus, the average 12-month price target of $76.52 represents a nearly 25% premium to current trading levels.

Short Sellers Turn Up the Heat on Royal Caribbean Stock

Morgan Stanley trimmed its fiscal 2018 and 2019 EPS forecasts for Royal Caribbean Cruises by 2%-3%, and cut its price target for the cruise stock by $20 to $110. RCL stock has plunged 3.1% out of the gate to trade at $103.25, earlier hitting a fresh 52-week low of $102.57.

RCL shares have now shed 24% since their late-January record high of $135.65, and breached long-term support at their 320-day moving average in late April. Against this backdrop, short sellers have been ramping up their bearish exposure to the struggling stock.

Short interest rose 5.1% in the most recent reporting period to 3.84 million shares. However, this accounts for just 1.8% of the stock's available float, and wouldn't even take two days to cover, at the average pace of trading. Royal Caribbean could get hit with stiffer headwinds should traders continue to short the stock.


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